COMMERCE U/S LAVIN'S MEETINGS WITH SINGAPORE'S

C O N F I D E N T I A L SECTION 01 OF 03 SINGAPORE 000943 SIPDIS SIPDIS STATE PASS COMMERCE FOR U/S LAVIN USTR FOR DUSTR BHATIA AND AUSTR BWEISEL E.O. 12958: DECL: 03/22/2016 TAGS: ECON ETRD EINV KIPR PREL PGOV EFIN PTER EAIR SN SUBJECT: COMMERCE U/S LAVIN'S MEETINGS WITH SINGAPORE'S LEADERSHIP Classified By: Ambassador Patricia L. Herbold for reasons 1.4 (b) and (d) ¶1. (C) Summary. Commerce Under Secretary for International Trade Frank Lavin assured Singapore's top leadership that the United States was pursuing a vigorous free trade agenda in the Asia region despite protectionist sentiment in Washington. Although a Malaysia FTA would help ASEAN integration, Senior Minister Goh Chok Tong questioned whether the GOM fully grasped what a "gold standard" FTA with the United States entailed. Minister Mentor Lee Kuan Yew doubted that Malaysia would be willing to dismantle its bumiputra-related ownership and labor requirements. Although Thailand Prime Minister Thaksin wanted an FTA, he lacked the support among the established elite, MM Lee said. Foreign Minister George Yeo surmised that, even if Thaksin won a solid majority at the polls, he would have to wait at least six months before trying to seek approval for the FTA. MM Lee observed that Indonesia was "creeping back" slowly to economic and political health; President Yudhoyono was decisive, but he "wasted time" soliciting and weighing different viewpoints. Both SM Goh and FM Yeo voiced their concerns about the Dubai ports decision, asking whether Singapore would have engendered the same reaction had it made the acquisition instead of Dubai. PM Lee worried about what Dubai meant for ongoing U.S. free trade initiatives and progress on the Doha round. With regard to Chinese President Hu Jintao's upcoming visit to the United States, Singapore's leaders noted the need for China to make political gestures on the trade front. On Iraq, MM Lee said that the ruling parties needed to find a way to bring the Sunnis back into the fold, at a minimum by striking a deal for sharing oil revenues. SM Goh asked for U.S. support in encouraging Australia to conclude an open skies agreement with Singapore (Note: Singapore is particularly interested in rights to fly from Singapore through Australia to the United States. End note). U/S Lavin raised Singapore,s view of antidumping with Trade Minister Lim, noting that Singapore,s participation in the &Friends of Anti-dumping8 was inconsistent with its genuine friendship with the United States. End summary. ¶2. (U) On March 21, U/S Lavin met with Prime Minister Lee Hsien Loong, Senior Minister Goh Chok Tong, Minister Mentor Lee Kuan Yew, Foreign Minister George Yeo, and Minister for Trade and Industry Lim Hng Kiang. U.S.-Malaysia FTA -------------- ¶3. (C) FM Yeo said he was pleased that Malaysia had agreed to pursue FTA negotiations with the United States. He noted that Malaysia's concerns with its declining level of foreign direct investment compelled it to make this decision. SM Goh questioned how serious Malaysia was about concluding an FTA, and asked if the GOM fully grasped what a "gold-standard" FTA with the United States actually entailed. MM Lee wondered why Malaysia would want an FTA if it meant having to dismantle its bumiputra (ethnic Malay) ownership and labor requirements. U/S Lavin expressed his hope that Malaysia Trade Minister Rafidah Aziz would be able to navigate domestic resistance; otherwise, Malaysia's FTA negotiations could stall like Thailand's had done in recent weeks. SM Goh observed that a successful FTA with Malaysia would help breathe life into Thailand's FTA. MTI Minister Lim said this in turn would bode well for ASEAN integration. U/S Lavin said that an FTA with Malaysia would benefit Singapore by increasing the overall level of economic activity with its largest trading partner. U.S-Thailand FTA -------------- ¶4. (C) MM Lee said that Prime Minister Thaksin wanted an FTA with the United States, but doubted his administration and the "old elite" supported one, given the domestic interests they wanted to protect. The King was not a supporter and his privy council "disliked Thaksin intensely," MM Lee observed. Noting the large demonstrations recently in Bangkok, MM Lee said that Thailand was in danger of going the "Corazon Aquino People Power" route. FM Yeo said that PM Thaksin was in a "tricky" position. He was "too arrogant and acerbic, and quick to reveal his true nature when pushed up against the SINGAPORE 00000943 002 OF 003 wall," Yeo asserted. Thaksin would need to do well at the polls during the upcoming elections to shore up support for the FTA. Even then, however, he would need to wait at least six months before trying to push it through parliament for approval, he said. Indonesia -------------- ¶5. (C) MM Lee said that Indonesia was "creeping back" slowly to economic and political health: President Yudhoyono knew what to do, but he was cautious, taking his time to solicit and weigh differing viewpoints. The good news was that, when he finally made a decision, he acted, MM Lee said; time might be lost, but Yudhoyono was moving in the right direction. FM Yeo said that he had just returned from Batam, Indonesia, where he met with GOI Vice President Kalla to discuss investor issues in Batam's special economic zone. He emphasized that the two countries needed to sort out the customs facilitation process. ¶6. (C) FM Yeo agreed with U/S Lavin that terrorists were on the defensive in recent months, but cautioned that the Muslim Brotherhood appeared to be gaining strength and was still a formidable force. FM Yeo held out good prospects for the Aceh peace agreement, noting that Aceh's leader was not corrupt and was close to President Yudhoyono. If Indonesia succeeded in solving the Aceh problem, this would create an environment conducive to solving other problems in the country, FM Yeo concluded. Dubai Ports Deal -------------- ¶7. (C) With regard to the recent Dubai Ports decision, both SM Goh and FM Yeo asked if the U.S. reaction would have been the same if Singapore instead of Dubai were making the acquisition. U/S Lavin said that the U.S. response, if any, would have been much more muted, perhaps eliciting only some rumblings about loss of jobs or purported links to China. He pointed out that the real question hinged on how well Dubai understood the Washington political process, not to mention U.S. public sentiment more broadly. Singapore would have lobbied more effectively, he ventured. FM Yeo lamented the "great harm" that this decision created globally: it sent the wrong message to friendly governments in the Middle East. He noted that Singapore stood to benefit from the increasing amounts of money that would flow its way rather than to the United States. FM Yeo said that Singapore was engaging the Middle East more vigorously than in the past, in part "because we need to protect ourselves." Whither Free Trade? -------------- ¶8. (C) PM Lee expressed concern that the recent protectionist backlash against Dubai Ports might have serious repercussions for ongoing U.S. FTA negotiations and progress in the WTO. In terms of promoting free trade, the United States was the "only good guy out there; we cannot rely on the EU," PM Lee said. MTI Minister Lim echoed these points, adding that he was skeptical current WTO negotiations would succeed unless the United States and the EU began cooperating on key issues. Asked about the implications of increasing protectionism on U.S. trade policy in Asia, U/S Lavin noted the rising frustrations in Congress over China. Confronted with a huge and growing trade deficit, U.S. government leaders were finding it increasingly difficult to indulge the Chinese, he said. The imbalance of Chinese companies enjoying excellent access to the U.S. market and U.S. companies facing numerous trade barriers (e.g., steel, beef, films, etc.) and IPR-related theft in the Chinese market was striking, U/S Lavin said. Chinese President Hu's Visit to the United States -------------- -------------- ¶9. (C) FM Yeo said that during their recent visit to Singapore, Zheng Bijian, China's (Communist) Party School Executive Vice President, and Dai Bingguo, Vice Minister for Foreign Affairs, solicited GOS views about how best to position the upcoming visit of Chinese President Hu Jintao to the United States. Singapore advised them that, with SINGAPORE 00000943 003 OF 003 President Bush challenged politically and rising protectionist sentiment in Congress, President Hu must be a "good guest" and "make it easy" for President Bush (by increasing market access and reducing trade barriers). U/S Lavin said that the USG had been making a similar point over the past few months, but the Chinese were taking a minimalist approach that fell far short of what was necessary to assuage Washington's concerns. Both PM Lee and SM Goh said that it was important for China to make a political gesture. PM Lee noted that China's economic team, including Vice Minister Ma, consisted of capable technocrats, but that they lacked the authority to make the tough decisions to push necessary reforms. FM Yeo advised U/S Lavin to find a way to assist Vice Minister Ma. She may appear unhelpful, but she was under instructions to deliver a good visit for President Hu, he said. India -------------- ¶10. (SBU) SM Goh said that India was serious about reform and that its recent rapid growth did not constitute a bubble. India needed to move forward with economic reform -- and infrastructure investment -- as fast as the political left would allow, he stated. The government needed to ensure that the benefits of India's growth trickled down quickly to ensure a broad base of support for further economic liberalization. Iraq -------------- ¶11. (C) MM Lee noted that the United States had set the highest possible targets for Iraq's democratization, the economy, and overall stability. The Sunnis appeared to have been cut out of the deal, which only made these objectives more difficult to achieve, he said. The Sunnis had been "used" by the Ottomans, the British, and finally by Saddam Hussein to counter the influence of the Shia majority and the Kurds, but no longer, he observed. At a minimum, the ruling parties should strike a deal whereby the Sunnis were entitled to their fair share of the oil revenues, he said. Iraq was not another Vietnam, MM Lee emphasized. The United States must have the resolve to see it through: U.S. withdrawal from Iraq would only swell the ranks of the Islamic fundamentalists. Australia and Open Skies -------------- ¶12. (C) SM Goh asked U/S Lavin for U.S. support in encouraging Australia to conclude an open skies agreement with Singapore. U/S Lavin agreed that all countries would benefit from opening up the Australian aviation market. Noting that the U.S. had gradually lowered its foreign ownership caps for U.S. carriers, he suggested that Singapore could partially achieve its goal by investing in a U.S. carrier. As a U.S.-owned entity, this airline could take advantage of the more liberal U.S-Australia aviation regime to fly Singapore-Australia routes. ¶13. (U) U/S Lavin cleared this message. HERBOLD